Stefan Thomas, a German-born programmer, and early crypto adopter, lost the password to his digital wallet containing 7,002 Bitcoin. Given BTC’s current price of $43,700 per coin, Stefan would be about $306 million richer if only he could somehow retrieve his password.
According to some experts, a quantum computer several million times more powerful than a standard computer could have easily generated the password.
Although quantum computing is still in its infancy, government-backed researchers and tech giants like Google and Microsoft are in the race to develop quantum computers.
When combined, cryptocurrency markets around the world and quantum computing could change the world for the better. Quantum computers could finally solve ‘impossible’ problems while cryptocurrencies could eliminate middlemen and bring banking to millions worldwide.
The Problem
Quantum computers can perform calculations millions of times faster than standard computers partly thanks to Shor’s algorithm: Shor’s algorithm drastically cuts the time a computer needs to solve factorization problems.
Since large prime numbers are an essential part of Bitcoin’s security mechanism (public-key cryptography), it is perhaps safe to assume that quantum computers could one day facilitate forged crypto transactions and sophisticated attacks.
What Is Public-Key Cryptography?
Public-key cryptography is the technology that ensures bitcoin users can create wallets and have their transactions signed securely.
But to understand this technology, we first have to acknowledge ECDSA (Elliptic Curve Digital Signature Algorithm), the protocol Bitcoin uses to create private keys and their corresponding public keys.
Public keys use a hashing technique to create a user’s public address, i.e., the alphanumeric character string they use to receive funds. On the other hand, private keys are a secret alphanumeric character string used to validate transactions when sending BTC.
While it is possible to derive a specific user’s public key from their private key, it is impossible for any computer in existence today to derive a private key from a public key.
This one-way functionality – hinged on the inability to solve large factorization problems – is a critical component of bitcoin’s security.
Who Is Vulnerable?
During Bitcoin’s early days, public keys also doubled as receiving addresses, i.e., p2pk (pay to public key) addresses.
This meant that senders could view their recipients’ public keys. Not long after, cryptography experts realized how vulnerable p2pk addresses were, initiating the transition to p2pkh (pay to pubkey hash) addresses that are still common today.
Currently, roughly 25% of all bitcoins maintain p2pk or recycled p2pkh addresses. And while most wallets prohibit bitcoin owners from reusing addresses, these coins might become vulnerable to theft when quantum computers come of age.
In theory, quantum computers could mathematically derive private keys from public keys, eventually making bitcoin’s price crash.
The Solution
Given the insecurity of p2pk addresses, mandating a shift to new p2pkh addresses seems like a reasonable solution.
However, this fix might be short-term at best; besides the legal complications, quantum computers might eventually become powerful enough to crack p2pkh security as well.
Instead, adopting quantum-resistant cryptography seems like the only future-proof option.
With QRL (Quantum Resistant Ledger), Bitcoin and other cryptocurrencies could incorporate quantum-resistant hash signature schemes like XMSS (Extended Merkle Signature Scheme). Unlike traditional signature schemes, QRL and XMSS combined will discourage signature reuse by constantly updating each user’s private key.
Conclusion
Thanks to immense funding and efforts dedicated to research and development, quantum computing is advancing far faster than anyone imagined.
For the proactive cryptocurrency holders keen on protecting their investments, quantum-resistant cryptography seems like the best – and perhaps only – long-term approach.